The Aussie is under pressure today among skids in global stock markets and an increase in bond yields that will make the U.S. dollar a more attractive investment. The comments by members of the Federal Reserve have boosted rising energy prices and inflationary concerns and push the U.S. yields and the dollar into higher. Meanwhile, the Reserve Bank of Australia (RBA) has said it is unlikely to raise its benchmark rate until 2024, when it is time to see real inflation within the 2 to 3 per cent target range.

Meanwhile weak commodity prices hit local mining stocks amid fears of production restrictions caused by the power crisis in China. China the Australia’s leading trading partner, is battling an expanding power crisis that has forced many factories supplying Apple and Tesla to shut down. This led miners .AXMM to fall as much as 2.3% to a near one-year low as prices of iron ore and copper dipped on fears over demand hit as per Reuter’s report.

Major headwinds to the economic recovery such as Covid-19 cases and rising prices, have traders reevaluating risk exposure.  Australia’s federal government will wind down emergency funding for people who lost work during COVID-19 shutdowns as vaccination rates increase across the country, putting pressure on state and territory leaders to keep their economies open.  Australia’s two biggest cities, Sydney and Melbourne and Canberra, have been in lockdown for several weeks as the country grapples with a Delta variant-fuelled third wave of the virus. The shutdowns have put Australia’s A$2 trillion economy on the brink of a second recession in as many years. Total cases in Australia stood at around 103,000, including 1,278 deaths.

Apart from this, concerns about the unresolved debt crisis of the China Evergrande Group’s have affected investor sentiment. This was evident from the cautious mindset surrounding the equity markets, which further benefited the safe haven Green back and drove the runs from the perceived dangerous Aussie. In other news, the lower trade by the Aussie suggests that traders are shrugging off the better-than-expected Australian Retail Sales data that came in at minus 1.7%.  With the tone of the central bank, energy prices are rising and concerns about China’s growth outlook are being raised – now the developer is at risk from the chaotic collapse of China Evergrande and the power outage that will hit the output.

Traders will take notes from the testimony of Fed chair Jerome Powell before the Senate Banking Committee around later North American session. This along with bond yields will affect the Greenback and create some meaningful trading opportunities for Aussie.

AUD/USD 4 Hour Chart:

Support: 0.7204 (S1), 0.7178 (S2), 0.7119 (S3).

Resistance: 0.7290 (R1), 0.7343 (R2), 0.7375 (R3).

Amidst this above catalysts the stronger U.S. Dollar gave pressure to Aussie and suppresses it into downtrend. We expect a bearish trend for AUD/USD.